To The Moon

Broadcom Plunges 12%, but Smart Money Is Buying the Dip

The AI infrastructure sector experienced a roller-coaster session on Thursday.

After $Broadcom(AVGO)$   plunged more than 12% following its earnings report, semiconductor and AI hardware stocks came under heavy pressure in early trading, raising concerns that weakness in one of the industry's key AI infrastructure leaders could signal a broader cooling of the AI trade.

However, sentiment improved rapidly as the session progressed. Several AI infrastructure names recovered their early losses, with $Marvell Technology(MRVL)$   and $Credo Technology Group Holding Ltd(CRDO)$   even turning positive, suggesting that investors were not broadly abandoning the AI infrastructure theme but were instead reassessing the implications of Broadcom's earnings report.

Yet while investors were selling Broadcom and questioning whether the AI infrastructure trade could remain intact, AVGO's options market revealed a notable bullish institutional bet.

Data showed that on Thursday morning, a trader executed two large call purchases, buying 2,460 contracts and 3,150 contracts, respectively, of the July 17, 2026 $450 calls at prices ranging from $13.97 to $13.99 per contract.

More importantly, both trades were executed after Broadcom's earnings release and subsequent selloff. In other words, this was not a pre-earnings speculation trade, but rather a contrarian position established during the post-earnings panic.

From a structural perspective, the trade represents a clear directional bullish bet.

At the time, Broadcom shares were trading around $409, meaning the $450 strike price implied roughly 10% upside over the next six weeks. The trade suggests that some investors viewed the post-earnings selloff as an overreaction and were positioning for a rebound.

In reality, Broadcom's earnings were far from disappointing.

The company reported second-quarter revenue of $22.2 billion, a new record high, while AI-related revenue reached $10.8 billion, up more than 140% year over year. More importantly, management guided third-quarter AI revenue to approximately $16 billion, indicating that demand for AI infrastructure remains robust.

From a fundamental perspective, AI demand has not slowed.

What disappointed investors was expectations.

Over the past several months, Broadcom shares had repeatedly reached new highs, driven by strong demand for ASICs, AI networking, and custom AI accelerators. As enthusiasm surrounding AI infrastructure continued to build, investor expectations for the company's future growth were pushed increasingly higher.

As a result, when the earnings report failed to deliver a new catalyst beyond the market's most optimistic assumptions, some investors chose to lock in profits, triggering a sharp pullback in the stock.

Viewed through that lens, the selloff appears more like an expectations reset than a deterioration in the AI thesis.

The large call buying in AVGO's options market suggests that at least some institutional investors share that view.

If investors were genuinely worried that AI demand was peaking, capital would likely rotate toward more defensive positioning. Instead, this bullish options trade emerged immediately after the earnings-driven selloff, indicating that some investors see the market's reaction as excessive and are positioning for a recovery in sentiment.

For the AI infrastructure sector, demand for ASICs, high-speed networking, and data-center interconnect solutions remains one of the most important long-term growth drivers. Broadcom also remains one of the key beneficiaries of the ongoing AI capital expenditure cycle.

From that perspective, the message behind this options activity is straightforward: at least some smart money investors view Broadcom's post-earnings plunge as an expectations reset rather than the end of the AI trade.

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